A Questionable Investment Scheme Dominated ASSOCHAM’s “Global Summit” On Bitcoin and Blockchain Technology

By Aria Thaker | 19 March 2017

On the morning of 3 March 2017, when Amit Bhardwaj took the stage in a packed auditorium at Delhi’s Hyatt Regency hotel, the audience erupted in a thunderous roar. Rows of people leapt to their feet, chanting, “Amit, Amit, Amit!”

Bhardwaj had stood to deliver a short speech during the opening session of a conference that the Associated Chambers of Commerce of India, or ASSOCHAM, had organised. The industry body had titled the conference “Bitcoin & Blockchain: The State of Cryptocurrency–Opportunities and Challenges for Indian Economy,” billing it as a “global summit” that would address the opportunities and challenges presented by bitcoin and other cryptocurrencies. Bhardwaj is the founder of a bitcoin-mining pool called GBMiners, which was also one of the conference’s main sponsors. According to the brochure of the conference, GBMiners would have paid Rs 5 lakh to be one of its “Blockchain partners.”

None of the other speakers at the summit got a reception anywhere close to Bhardwaj’s. Sandeep Goenka—an executive of Zebpay, one of India’s leading bitcoin exchanges, which also was a sponsor of the conference—seemed bemused as he took the podium after Bhardwaj. “All the applause has gone to the previous speaker,” Goenka noted. NS Nappinai, an advocate who spoke later that day about the legal questions raised by cryptocurrencies, included a slide in her PowerPoint presentation that showed Bhardwaj’s photograph next to a picture of Superman. “If you’re not going to clap for my lecture, at least clap for Amit Bhardwaj,” she quipped, drawing applause and hoots.

ASSOCHAM, founded in 1920, is one of India’s leading industry bodies. The organisation, which lobbies the government on behalf of corporate interests, has over 450,000 members—a category that includes representatives from industry, trade, law and consulting, among other fields. The current head of ASSOCHAM is Sandeep Jajodia, the chairman and managing director of Monnet Ispat and Energy, a manufacturing and coal-mining company. Former presidents include: RN Dhoot, a member of parliament and owner of the Videocon group; Rana Kapoor, the founder, managing director and CEO of Yes Bank; and Sajjan Jindal, the chairman and managing director of JSW Steel.

The industry body, it seemed, had orchestrated its summit on cryptocurrencies at a fortuitous moment. The price of bitcoin—the pioneering cryptocurrency created in 2009—had recently hit its all-time high. On 3 March, as the conference was underway, the cryptocurrency made international headlines because, for the first time ever, the price of one bitcoin, sitting at an average global rate of $1,290, had crossed that of an ounce of gold.

During the weeks that preceded its conference, ASSOCHAM had plastered large billboards in stations of the Delhi Metro, advertising the names and faces of individuals slated to speak at the summit. These included: PP Chaudhary, the union minister of state for law and justice and electronics and information technology; Rama Subramaniam Gandhi, a deputy governor of the Reserve Bank of India; Shaktikanta Das, the economic affairs secretary; and Suresh Chandra, the union law secretary. The promised attendance of government officials was notable, given that the government of India has yet to pass any regulations on cryptocurrency. The RBI appears to be following a similar approach as well. However, the central bank has, from time to time, issued warnings to Indian investors and the government about the perils of cryptocurrency, starting with the release of a cautionary circular in 2013.

All the seats at the conference were sold out. Hundreds of guests occupied the chairs in the auditorium, while many stood in the aisles. A majority of the attendees—all of whom had to pay a registration fee of Rs 5,000—seemed to be investors in Gainbitcoin: also one of Bhardwaj’s companies. Gainbitcoin is a “cloud-mining” company—it pools individual  investments, in bitcoins, to pay for the “mining” of bitcoins. The company guarantees its investors returns of 10 percent per month on their principal investments, which are locked in for 18-month contracts. In my cover story for The Caravan’s March 2017 issue, I discuss in detail the ways in which Gainbitcoin employs suspect, and very likely fraudulent, business practices. Bitcoin mining—an expensive computational process, and the only way to create new bitcoins—is a highly unpredictable way to make money, making it implausible for mining companies to guarantee fixed returns for their investors. People who have knowledge of bitcoin mining often criticise companies such as Gainbitcoin—which offer unrealistically high, fixed returns—labelling their business models Ponzi scams. (In Ponzi scams, people are duped into believing their money will grow due to high-yield investments. In reality, the scammers simply shuffle that money around, paying off older investors with funds flowing in from new ones. When new recruits stop investing in the scheme, it collapses, and most investors lose their money.) Gainbitcoin also utilises multi-layer marketing, a predatory business strategy through which it encourages existing partners to recruit new ones by offering them a cut of the revenue from anyone they bring in. According to a note that the RBI released in January 2015, “acceptance of money under Money-Circulation/Multi-Level Marketing/Pyramid structures if a cognizable offence under the Prize Chit and Money Circulation (Banning) Act 1978.”

In December 2016, I had attended another cryptocurrency-related conference in Delhi, during which I met Stuart Trusty, a bitcoin miner and an expert in high-performance computing. Trusty told me that Gainbitcoin’s promised returns were “mathematically impossible.” The operation “would have to be a Ponzi,” he added. In January 2017, Kyle Torpey, a journalist who covers cryptocurrencies, wrote an article about Gainbitcoin titled titled “The Founder of India-based Bitcoin Mining Pool GBMiners is Running a Ponzi Scheme,” in which he analysed why the cloud-mining company’s unrealistic promises did not stack up with the realities of mining bitcoin.

Over the course of my reportage for The Caravan’s cover story, I conducted four interviews with Bhardwaj. During these conversations, he repeatedly contradicted himself, and was evasive about the relationship between GBMiners and Gainbitcoin. He also admitted, with casual ease, that he had lied to his investors about crucial information regarding Gainbitcoin’s investments (“They feel good, right? When they get high information,” he told me about his customers, after admitting to using inflated figures on Gainbitcoin’s website.) Bhardwaj has been declared a defaulter in one of the six India-based entities he directs. For two of these companies, he has flouted the law by never filing annual balance sheets with the ministry of corporate affairs.

By organising this conference with key sponsorship from GBMiners, ASSOCHAM failed to perform due diligence. Moreover, it did not appear to have considered the credibility of those it provided with a platform to represent cryptocurrency in India. The conference also showed other signs of haphazard planning, most notably in the fact that four of the five government representatives ASSOCHAM had advertised as speakers for the event did not show up. If the industry body hopes to establish greater legitimacy for bitcoin and cryptocurrency in the country, then this summit was, at best, a rocky start.

During the conference’s lunch break, I spoke with several attendees who had purchased contracts with Gainbitcoin. Vivek Kesharwani, one such individual, told me that he had invested 224 bitcoins with the company—a sum that, by Indian prices on 3 March, was valued at about Rs 2.1 crore. He rapidly introduced me to four other Gainbitcoin investors, summoning them easily from his immediate vicinity. Kesharwani claimed that 90 percent of the conference attendees were Gainbitcoin investors.

Vishal Gupta, a prominent bitcoin entrepreneur who spoke in one of the conference’s panels, echoed Kesharwani’s estimate. (Gupta is the CEO of SearchTrade.com, which was also one of the sponsors of the conference.) Later, when I spoke to Bhardwaj about the estimate, he scoffed, “What, only 90 percent?” He claimed that the entire crowd was composed of his investors.

In the remarks that he had offered to the audience in the morning, Bhardwaj did not make a direct sales pitch for Gainbitcoin. He spoke for about two minutes, delivering general comments about the bitcoin community. Blockchain—the underlying technology of bitcoin—he said, had changed “the way trust has to be done” in the economy. He said that banks operate solely on the trust between individuals, and that blockchain technology had allowed trust to be “built up by the machine, so you don’t have to trust a human being to take decisions on your financial systems. And that is what is going to actually make the whole difference.”

Bhardwaj was not the only speaker of questionable qualifications at the conference. Another speaker and sponsor was Louis De Laventure, who ASSOCHAM listed as the CEO of EB3—which seems to be a company that markets an alternative cryptocurrency called “EB3 Coin,” about which users of the forum bitcointalk have raised suspicions. De Laventure spoke in the conference’s opening session along with Goenka and Bhardwaj. Entire paragraphs of his speech at the summit were lifted verbatim from a speech delivered in November 2016 by Carl Ludwig-Thiele, a member of the executive board of Deutsche Bundesbank.

Another sponsor of the conference, Power Hashing, is, like GBMiners, another India-based company about whom I raise serious questions in my report for The Caravan’s March issue.

After lunch, I spoke to Sandeep Goenka, the Zebpay executive. He told me that Zebpay had chosen to attend and sponsor the conference, in part, to act as a counterweight to Bhardwaj and Gainbitcoin, especially since government officials would be in attendance. “We just wanted to make sure that if there’s anything that we don’t like which is being said, then we can talk about it, but luckily, it wasn’t the case,” Goenka said. “It was not a hard-core marketing pitch by them.” Referring to the composition of the audience, he said, “I think they [Gainbitcoin] didn’t even need to.”

Zebpay has made it clear several times on their website and Facebook page that cloud-mining companies such as Gainbitcoin, which guarantee fixed returns, are very likely scams. The company has posted a list of 14 entities on its website, cautioning people against investing in them. Gainbitcoin is one of those 14 entities.

However, Goenka said that such explicit warnings had largely fallen on deaf ears. “It’s not getting through,” he told me, “So I’ve stopped debating. I’ve said, ‘This is my view. And it’s your money. You take a call.’” When I asked him whether he had considered alerting the government of such foul play, he expressed the need to proceed with caution. The authorities, he said, “are anyway sceptical of cryptocurrencies. So I’ve not had a chance to go and tell them there’s something bad happening within the cryptocurrency world.”

During the speech that Union Law Secretary Suresh Chandra delivered at the opening session, he expressed optimistic views about cryptocurrency—stating that it would “definitely bring down costs” of businesses. He also expressed some concerns about issues such as money laundering, fraud and other criminal activity that could be fostered by the near-anonymity of cryptocurrency transactions. Nevertheless, he finished his talk with a vote of confidence for ASSOCHAM, and said that the summit would “ensure a path to the stakeholders, to the decision-makers, to the policymakers, how to move forward.” After the conference, I called Chandra’s office multiple times and was told that he was busy. I emailed him questions about his views of the conference and its sponsors, particularly GBMiners, but did not receive a response.

Chandra was the only representative from the government who actually spoke at the conference. I attempted to reach those who had not attended the summit even though their names had been listed on ASSOCHAM’s promotional materials as well.

When I met PP Chaudhary in his office, he told me that he could not attend the conference because an urgent matter had come up. RN Dhoot’s secretary told me that Dhoot had simply been too busy to attend. When I called the RBI’s office to ask why R Gandhi had been absent, Jose Kattoor, a chief general manager of the RBI, told me he had checked with Gandhi’s secretary and found that the deputy governor’s official schedule had not included a commitment to speak at the conference. I emailed and phoned Shaktikanta Das to enquire about his absence at the summit, but he did not respond.

In a brief set of remarks at the end of the opening session of the conference, Santosh Parashar, a joint director of ASSOCHAM, who headed the efforts to organise the summit, said he had “been getting warnings in my inbox” about cryptocurrency-related scams. He said he wanted to echo the RBI’s 2013 warning to avoid technology-based scams and Ponzi schemes. Parashar’s words of caution, however, rang hollow when they were delivered from the dais that Bhardwaj had just spoken from. When I called Parashar to ask whether he was aware of Bhardwaj’s business practices, he asked me to email him my questions. I did, but he did not respond to them. Neither Sandeep Jajodia nor DS Rawat, the president and secretary-general of ASSOCHAM, respectively, responded to my questions either.

On 21 April, ASSOCHAM will be hosting a “2nd Global Summit” on bitcoin and blockchain in Bengaluru. This event will also have a registration fee of Rs 5,000. It remains to be seen whether Bhardwaj will be a sponsor for that conference as well. If he is, and if ASSOCHAM continues to demonstrate such disregard for who it gives a platform, India’s nascent cryptocurrency ecosystem will jeopardise much of the credibility it is fighting hard to gain.

 

Aria Thaker is a copy editor at The Caravan.

READER'S COMMENTS

13 thoughts on “A Questionable Investment Scheme Dominated ASSOCHAM’s “Global Summit” On Bitcoin and Blockchain Technology”

I wonder when the Law Enforcement officers are going to take an action on this scammer and his scam team. ( I am sure they will but when- I have already went to inform them, told everything about this scammer and his scam team) He is not in prison and he keeps coming up with new scams, advertising all around as his business is Bitcoin. He uses Bitcoins money making name. His business is not Bitcoin. He uses on his sites, advertisements as news, uses Forbes, A German Hedge Fund Manager, Bill Gates and some other well known people as if they are talking about him and Gainbitcoin, MCAP and his other scams. When is he going to be stopped so no more people would get burned by this scammer. This man will always scam. He is a repeat offender just like pedophiles.

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